Incisive commentary from leading voices in the world of compliance

Confessions of a Compliance Officer: Bewilderment in the corridors of power

A London-based compliance officer is amused at what bank workers reveal to him about their knowledge of their firms and he tells KYC360 the issues are common even at the top. He does not wish to disclose his name and details.

I recently went into a local branch of a high street bank to get some cash from an ATM. My attention was drawn to a poster announcing the changes that will be brought about the ringfencing legislation which takes effect in January 2019.

As the poster invited customers to ask staff for more details, I approached a member of staff and asked “Can you please tell me about ring-fencing?”

He replied “I’m glad you asked me that as we had training on it yesterday afternoon. Ringfencing is about [our bank] giving greater protection to the personal data that we hold about you.”

I was surprised to say the least.

“Really! Are you sure that you are not confused with the General Data Protection Regulation which comes into effect on 25 May 2018? I pondered.

I advised the bank staff member that ringfencing applied to all banks and was intended to prevent a collapse of some retail banks that we had seen in 2008. I also explained how that objective is to be achieved.

I wonder whether I am very unlucky to find the one staff member who could not explain what ringfencing was and how it affected the bank’s customers or whether the incident reflects a more widespread lack of understanding within the bank.

Hiring headaches

The point, I think, is whether some workers actually know what they are doing in their jobs? I suspect one of the problems is down to the hiring process.

It’s possible that a clued-up HR or bank boss should be able to spot that this interviewee will likely muck things up if we give them the job, right?

Take for example, a few years ago, when I was working for an investment bank in London, I had to hire a number of KYC clerks whose role would to be collect documentation to verify the identity of new customers and re-verify existing customers on a regular basis.

I selected candidates for interview who had been performing similar roles at other institutions in London. During the interview I would ask them to discuss their CV and their experience in their current role.

I asked all the candidates the following question: “You have a new client who is a private limited company. You have every document that your checklist requires. What questions do you now ask yourself?”

This question flummoxed all the candidates as none could provide an answer that I was looking for.

I was very disappointed that none suggested an answer along the lines of “Does this all make sense?” or “Are all the documents consistent with one another or are there inconsistencies between the documents?” or “Do the documents tell the same story as the story told by the Front Office salesperson or the New Account Form?”

Ok, if you think perhaps my question was a bit hard, how about this one I usually asked interviewees with compliance backgrounds: “What is FATF (Financial Action Task Force)?”

“I don’t know,” was the usual response.

Seriously.

From current discussions with colleagues, it appears that little has changed in this key control in taking on new clients, with many KYC clerks performing a purely administrative function of collecting and collating documents without taking the time to read and analyse them.

It appears that there may a need for better training in the industry.

‘Tone at the top’

But the issue is not just with junior staff.

It seems to be that even from high up in the corridors of power bank chiefs are at times left somewhat bewildered too about basic information about their own firms.

The recent hearing of the Treasury Select Committee into the GRG unit of Royal Bank of Scotland (RBS) provided some cause for concern across the financial services industry.

Representing RBS was Sir Howard Davis, Chair, and Ross McEwan, CEO.

The Committee Chair, Nicky Morgan MP, asked Sir Howard whether RBS would be publishing the report by the Banking Standards Board (BSB), based on an anonymous staff survey, into the culture at RBS.

Sir Howard advised Ms Morgan that the report was not “intended for publication”.

He was immediately corrected by Ms Morgan, who said that she had consulted both the BSB Chair and Chief Executive, who advised that each bank was free to publish their individual report if they so wished.

Ms Morgan then suggested that it may be a breach of the transparency principles enunciated by the RBS if they failed to publish their BSB report. Sir Howard sheepishly said that he would go away and consider her comments.

RBS subsequently confirmed to the Select Committee that they would not be publishing their BSB report on the grounds that no other bank does so and they already publish details of their employee engagement survey in the RBS Annual Report.

Ms Morgan responded by reminding RBS that it was a taxpayer majority owned bank, that it should show some leadership on this issue and questioned whether RBS had “fundamentally changed” its culture which it had frequently claimed to do.

As it goes, I contacted the BSB to enquire how many of the 22 institutions that took part in their 2016/17 culture survey, again based on anonymous staff surveys, published their individual BSB report. ‘None’ was the BSB response. I wonder what they have got to hide!!

In the same hearing, Ms Morgan asked Ross McEwan whether he could tell her what are the four core values of RBS.

He answered “Customer service…..working well together……..thinking long term……….I am struggling with the fourth one.”

She reminded him “Doing the right thing,” and asked “Do you think that, for the members of your staff, those four core values trip off the tongue?”

He noted that the bank was being rebuilt around those values, “but there was still work to do.”

I think it is somewhat disappointing that the chief executive of a bank which has promoted itself as a reinvented ethical bank that places its customers first, cannot articulate what those values are.

Indeed, one does wonder that if CEOs in the corridors of power struggle with naming their basic values, can we expect staff to know (and practice) those values or even remember what they were trained about the previous day?

KYC360 contacted RBS to comment but it did not responded by press time.

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